Average T-bills Yield Rose Significantly by 208bps to Close the Week at 14.43%

The
money market rate increased last week as the Overnight rate (OVN) and Open Buy
Back (OBB) rose to 12.00% and 10.67% respectively. Consequently, the average
money market rate increased by 8.21% to settle at 11.14% due to reduction in
system liquidity to close at cN300bn as a result of outflow from Retail FX
funding of cN320bn, OMO sales of cN103.70bn (N81.95bn on Tuesday, N21.75bn on
Monday, CBN declared No sales result on Thursday) and Wholesale, Invisibles and
SME FX auction of $210mn despite inflow from OMO maturity and Bond coupon
payment during the week.

We
expect rates to inch up on Monday as banks are expected to fund for another
round of FX sales in the Wholesale, Invisibles and SME Market. Barring
significant inflow during the week, the rate is expected to close the week
higher.

Instrument

07/09/2018

14/09/2018

Change

OBB

2.83%

10.67%

+7.84%

OVN

3.42%

12.00%

+8.58%

Source:
Anchoria AM Research, FMDQ OTC

Forex: USD/NGN

The
CBN Official rate and the rate in the Investors and Exporters’ FX Window rose
by 0.02% and 0.11% to close at N306.25/$ and N363.18/$ respectively. Naira at
the parallel market inched up by 0.14% to close at N360.50/$ (using the Everdon
BDC Rate).

We
expect rates in the parallel market to remain constant as the apex bank
continues to supply FX into the market coupled with its frequent Wholesale and
Retail SMIS programme.

07/09/2018

14/09/2018

Change

CBN
Official Rate

306.20

306.25

+0.02%

I&E
FX Window

362.78

363.18

+0.11%

Everdon
Rate

360.50

360.50

+0.00%

Source:
Anchoria AM Research, FMDQ OTC

Fixed Income

Bond

The
Bond market traded on a bearish note last week with sell offs on most the
tenors except for 2021 and 2028 bonds which witnessed increased buying interest
from local participants, yield on 2028 bond fell by 16bps. The FEB 2028 and MAR
2036 bonds were the most traded bonds during the week with N45.72bn and
N41.73bn value traded respectively. Average yield rose by 21bps to close the
week at 15.27%. This can be attributed to the following a) expected increase in
FGN borrowing; b) Anticipated Monetary of the CBN with a tightening stance
ahead of MPC meeting between 24 and 25 September 2018; c) gradual weakening of
the Country’s Currency; d) Increase in 364 days T-bills spot rate.

Secondary
Market

Source: Anchoria AM Research, FMDQ OTC

Treasury
Bills

Due
to reduced system liquidity during the week, the treasury bills market traded
on a bearish note following the hike in 364 days T-bills at the Primary market
auction. Consequently, the average yield rose significantly by 208bps to close
the week at 14.43%. Market activities was relatively quiet as value of
transactions fell to N1.44trillion from N1.54trillion in the previous week.